Facebook now has a mobile strategy: buy all the things!

A former colleague remarked today that while no one in the Valley saw it coming, thousands of blogs were still able to publish “Why Facebook Bought Instagram” articles shortly after the news broke. It’s an interesting observation, but not entirely fair; ignorance of an impending event does not preclude one from understanding why an event happened. And not to toot our own horn, but UNTETHER was well aware of the likelihood that Instagram would be bought – we just thought it should be Twitter.

That said, I’m partial to Om Malik’s explanation of why Facebook bought Instagram, both for its directness and insight. Here’s a snippet.

Facebook was scared shitless and knew that for first time in its life it arguably had a competitor that could not only eat its lunch, but also destroy its future prospects. Why? Because Facebook is essentially about photos, and Instagram had found and attacked Facebook’s achilles heel — mobile photo sharing.

I think Om is spot on. Photos are Facebook’s bread and butter, and Instagram was definitely in for a bite. But there’s a larger story here: mobile photo sharing isn’t Facebook’s achilles heel, it’s mobile in general. To completely inundate this paragraph with half-thought analogies, we can say that Facebook’s purchase of Instagram is an attempt to find a cure by buying the symptom.

I’ve been harping on Facebook’s mobile woes for awhile now. To quickly summarize, I believe that Facebook’s bloated, desktop-oriented social network is ripe for disruption by mobile-first applications that do one thing better than Facebook does anything – like Instagram with mobile photo sharing.

I proposed two solutions for Facebook: a completely revamped mobile-first social experience (i.e. Path), or a suite of mobile apps focused on adequately delivering Facebook’s core functionality (e.g. Facebook Messenger). I believe Facebook’s purchase of Instagram demonstrates that it is choosing the latter path (not the Path path).

Many people are worried that Instagram is doomed to eventually be absorbed into the big blue social machine. I don’t think that’s the case, and not just because Zuckerberg said as much in the acquisition announcement. While we may see some of Instagram’s core filter tech integrated into Facebook.com (filters!), I believe that as a mobile entity, it will stay mostly independent (although easier photo viewing/sharing between Instagram and Facebook accounts over social competitors seems obvious). Why? Because Instagram is really only valuable if its allowed to focus on doing one thing well.

With the Instagram purchase, and the release of Facebook Messenger, Facebook now has two dedicated apps for core mobile social functionality: photos and messaging. While Zuck indicated that Facebook would not likely purchase any companies with the user base of Instagram, I do not believe that will stop Facebook from either buying or building dedicated applications to round out its portfolio. Remember that Facebook also recently purchased Gowalla. While that service was shuttered following the acquisition, it was likely because Facebook thought it was better served by having the Gowalla team build them a dedicated app. If Instagram didn’t have nigh on 30 million users, Facebook would likely shutter the service in the same way.

All mobile roads lead to Rome

Perhaps this is why Facebook likely won’t buy any more services the size of Instagram: they’d prefer a revamped Facebook Places app built by the Gowalla team to “Gowalla, Powered by Facebook.” While this may be true, I can’t help think back to when Yahoo! was buying companies left and right, hoping to absorb them into its brand. How did that go?

As a social network built on selling user data, Facebook shouldn’t really care how that data gets there, only that it does. So why not roll out an advanced acquisition strategy to ensure all mobile roads lead to Rome? Screw the Gowalla team, Zuck should go buy Foursquare (“powered by Facebook!”). Netflix and Rdio are already integrated into Facebook’s Open Graph solution – buy them and now Facebook has mobile video and music offerings. Hell, Microsoft owns Skype, which owns part of Facebook! For those keeping score, the above acquisitions would allow Facebook to offer great mobile location, photo, messaging, music, movies and video communication services. It would cost Facebook a pretty penny, but that penny would effectively end any and all disruption threats.

It is highly unlikely that Facebook will execute the scenario above, but that doesn’t mean the social giant isn’t preparing its own version. Regardless of whether they were built or bought, prepare for a wall of Facebook apps on your smartphone. May God help us all.

About the author

Douglas Soltys

Douglas is the former Editor-In-Chief of Inside BlackBerry, BlackBerry Cool, and QuicklyBored, which he launched as a mobile gaming industry site. His knowledge of mobile and social media led him to a job at RIM (BlackBerry), where he got to travel the world and do lots of cool things. He is often left-handed, but rarely sinister.

  • Love this Douglas – why don’t they just buy them all. I can’t see them spending $1 billion on Instagram (that isn’t generating a single penny of revenue yet) to leave them alone I’d be shocked and investors should be as well. They have to do something with them – data collections, targeted advertising, something. The revenue riddle has been passed from Systrom to Zuck.

    The other point is the price, that is an insane amount of money. I realize it is only 1% of their value but, in thinking about that a little deeper, how can anyone justify a $100B valuation on $3.5B of revenue? Everyone seems to have accepted that as fact but what makes Facebook worth 33X revenues?

    Interesting times for sure. Is this the moment we look back and realize the mobile bubble had arrived?

  • Instagram isn’t worth $1B on it’s own. But it IS worth $1B to Facebook to keep it dominant in the photo space, keep its competitors from owning it, and help build its mobile strategy. Instagram doesn’t need revenue now. Instagram is the data stream that fuels Facebook’s revenue.

    It’s likely that Facebook was able to buy Instagram because they offered WAY more than anyone else. But that’s because Instagram is worth WAY more to anyone else, with the exception of maybe Twitter. But did Twitter have $1B to spend?Not sure about bubble.. Also not sure about potential Facebook anti-trust case if they do buy everyone….Sounds like good fodder for tomorrow’s WTM.

  • @TacoQuestApp is still available.  Just FYI.

  • I’m not sure I buy that there’s value in making small purchases for Facebook unless it’s a talent play (ala Gowalla). Facebook has the ability to take any app they want to the top of the charts by virtue of the size of the user base they can promote it to. Making big purchases makes more sense as they’d be buying into an established #1 app which may have enough users to actually compete against a Facebook branded competitor. Provided Facebook actually can build a viable competitor in a market, it makes more financial sense to do that then buy a 2nd tier player or buy a company in a market were a dominant leader has not emerged (since with no dominant player the market is open for someone to come in and provide a best-of-breed solution).

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